A STUDY ON PORTFOLIO MANAGEMENT

AT
SHAREKHAN LIMITED, KOCHI
A project report submitted in partial fulfillment of the requirements for
the award of the degree.
Of
BACHELOR OF BUSINESS ADMISTRATION
Submitted By
A.CHITRA
1053-320-684-001
Submitted to

Department of management studies

Under the Guidance of

Ritika Tiwari

Assistant Professor
Department of Commerce

A.V. College of Arts, Science and Commerce.

(Affiliated to Osmania University)
Domalguda, Hyderabad -500029 (2020-2023)
 DECLARATION
I hereby declare that this project report titled PORTFOLIO MANAGEMENT
AT SHAREKHAN LIMITED, submitted to the department of Business
Administration , O.U, Hyderabad, is a bonafide work undertaken by me and it
is not submitted to any other University or Institution for the award of any
degree diploma /certificate or published any time before.

Name and Address Student Signature

A.CHITRA
Hyderabad
 CERTIFICATE

This is to certify that the project work titled PORTFOLIO MANAGEMENT

AT SHAREKHAN LIMITED is being submitted by Mrs. A.CHITRA, bearing
H.T.No 1053-320-684-001 respectively as a part of curriculum in the partial
fulfillment for the award of BACHELOR OF BUSINESS
ADMINISTRATION(BBA) in A V College of Arts, Science & Commerce,
Domalguda , Hyderabad for the academic year 2020-2023. This has not
submitted to any other university or institution for the award of any degree.

INTERNAL SIGNATURE EXTERNAL SIGNATURE PRINCIPAL

 ABSTRACT

Investing in equities to manage their investments, portfolio management service (PMS)

comes as an answer. requires time, knowledge and constant monitoring of the market. For
those who need an expert to help the business of portfolio management has never been an
easy one. Juggling the limited choices at hand with the twin requirements of adequate safety
and sizeable returns is a task fraught with complexities. Given the unpredictable nature of
the market it requires solid experience and strong research to make the right decision. In the
end it boils down to make the right move in the right direction at the right time. That's where
the expert comes in.
The term portfolio management in common practice refers to selection of securities and
their continuous shifting in n way that the holder get maximum returns at minimum possible
risk. Portfolio management services are merchant banking activities recognized by SEBI and
these can be rendered by SEBI authorized portfolio managers or discretionary portfolio
managers. A portfolio manager by the virtue of his knowledge, background and experience
helps his clients to make investment in profitable avenues. A portfolio manager has to
comply with the provisions of the SEBI (portfolio managers) rules and regulations 1993.This
project also includes the different services rendered by the portfolio manager . It includes
the functions to be performed by the portfolio manager. what is the difference between the
value of time and money? In other words , learn to separate time from money.
When it comes to the importance of time, how many of us believe that time is money. We all
know that the work done by us is calculated by units of time. Have you ever considered the
difference between an employee who is working on an hourly rate and the other who is
working on salary basis? The only difference between them is of the unit of time. No matter
whether you get your pay by the hour, bi-weekly, or annually ; one thing common in all is
that the amount is paid to you according to amount of time spent on working. In other
words, time is precious and holds much more importance than money. That is the reason the
time is considered as an important factor in wealth creation . The project also shows the
factors that one considers for making an investment decisions and briefs about the
information relaed to asset allocation.
 ACKNOWLEDGMENT

I wish to express my sincere gratitude to Ms.Ritka Tiwari Assitant Professor,

for providing an a opportunity and extended support to do project work in
“PORTFOLIO MANAGEMENT AT SHAREKHAN LIMITED”
I Sincerely thank Ms.Ritika Tiwari , Assistant professor of commerce,
Department of Business Adminstration, A.V college of Arts, Science &
Commerce, Hyderabad for her guidance and encouragement in carrying out
this project work.
I also wish to express my gratitude to the Dr Gowthami(correspondent) A V
College Dr. RAJALINGAM (principal) Ch . Buchi Reddy(Hod) and other
faculty members of Department of Business Addminstration , A.V college of
Arts, Science & Commerce, Hyderabad. For rendering their support to
embark in this project.

A.CHITRA

1053-320-684-001
 INDEX

CHAPTER PARTICULARS PAGE

NO NO

1 INTRODUCTON 1-25

2 REVIEW OF 26-27
LITERATURE

3 COMPANY PROFILE 28-34

4 DATA ANALYSIS 35-62

AND
INTERPRETATION

5 RESEARCH FINDING 63-64

AND CONCLUSIONS

6 BIBLIOGRAPHY 65

7 ANNEXURE 66
 1. INTRODUCTION

• Introduction

• Need for the study

• Objectives

• Scope of the study

• Limitations

*Research methodology

• Source of data

• Research design

• Sampling methods and techniques

• Statistical tools

2. REVIEW OF LITERATURE

3. COMPANY PROFILE

• Theoritical framework

• Vision

• Mission
• Privacy policies

• Products & Services

• Organizational Structure

4. RESEARCH DATA ANALYSIS INTERPRETATION

• Formula

• Table

• Interpretation

• Graph

5. RESEARCH FINDING AND CONCLUSIONS

6. BIBLIOGRAPHY

• References (Textbooks and websites)

7. ANNEXURE
 LIST OF TABLES

4.1: Return , R(Avg) calculation of NSE CNX Nifty

4.2: Risk , S.D Calculation of NSE CNX Nifty

4.3: Return , R(Avg) Calculation of HDFC Bank Limited

4.4: Risk, S.D Calculation of HDFC Bank Limited

4.5: Return , R(Avg) Calculation of Lupin Limited

4.6: Risk, S.D Calculation of Lupin Limited

4.7: Return , R(Avg) Calculation of HUL

4.8: Risk, S.D Calculation of HUL

4.9: Return , R(Avg) Calculation of TCS

4.10: Risk, S.D Calculation of TCS

4.11: Return , R(Avg) Calculation of Tata Motors

4.12: Risk, S.D Calculation of Tata Motors

4.13: Beta of Stock

4.14: Return, Risk, & Beta of individual stock

4.16: Correlation and Covariance of Portfolios

4.17: Return and Risk of Portfolio 1

4.18: Return and Risk of Portfolio 2

4.19: Return and Risk of Portfolio 3

4.20: Return and Risk of Portfolio 4

4.21: Return and Risk of Portfolio 5

4.22: Return and Risk of Portfolio 6

4.23: Return and Risk of Portfolio 7

4.24: Return and Risk of Portfolio 8

4.25: Return and Risk of Portfolio 9

4.26: Return and Risk of Portfolio 10

4.27: Beta of Portfolios

4.28: Sharp’s Index

4.29: Treynor’s Index

4.30: Jenson’s Index

Annexure
 LIST OF GRAPHS

4.1: Return, Risk and Beta of Individual Stocks

4.2: Return, Risk and Beta of Portfolios

4.3: Portfolio Ranks based on Sharpe’s Index

4.4: Portfolio Ranks based on Treynor’s Index

4.5: Return and Expected Return (ERP) of Portfolios

 CHAPTER 1

INTRODUCTION

Investment may be defined as an activity that commits funds in any financial form in the present
with an expectation of receiving additional return in the future. The expectations bring with it a
probability that the quantum of return may vary from a minimum to a maximum. This
possibility of variation in the actual return is known as investment risk. Thus every investment
involves a return and risk.

Investment is an activity that is undertaken by those who have savings. Savings can be defined
as the excess of income over expenditure. An investor earns/expects to earn additional monetary
value from the mode of investment that could be in the form of financial assets.

The three important characteristics of any financial asset are:

 Return- the potential return possible from an asset.

 Risk-the variability in returns of the asset from the chances of its value going up/down.
 Liquidity the case with which an asset can be convened into cash.

Investors tend to look at these three characteristics while deciding on their individual preference
pattern of investments. Each financial asset will have a certain level of each of these
characteristics.

INVESTMENT AVENUES

There are a large number of investment avenues for savers in India. Some of them are
marketable and liquid, while others are non-marketable. Some of them are highly risky while
some others are almost risk less. Investment avenues can be broadly categorized under the
following heads:

 Corporate securities
 Equity shares.
 Preference shares.
 Derivatives.

1
  Debentures/Bonds
 Others.

CORPORATE SECURITIES

Joint stock companies in the private sector issue corporate securities. These include equity
shares, preference shares, and debentures. Equity shares have variable dividend and hence
belong to the high risk-high return category: preference shares and debentures have fixed returns
with lower risk.

The classification of corporate securities that can be chosen as investment avenues can be
depicted as shown below:

• Equity Shares • Preference shares • Bonds • Warrants • Derivative

Equity Shares

By investing in shares, investors basically buy the ownership right to the company.

When the company makes profits Shareholders receive their share of the profit in the form of
dividends. In addition when company performs well and the future expectations from the
company very high, the price of the company's shares goes up in the market.

This allows shareholders to sell shares at a profit, leading to capital gains. Investors can invest in
shares either through primary market offerings or in the secondary market. The primary market
has shown abnormal returns to investors who subscribed for the public issue and were allotted
shares.

2
STOCK EXCHANGE

In a stock exchange a person who wishes to sell his security is called a seller, and a person who
is willing to buy the particular stock is called as the buyer. The rate of stock of depends on the
simple law of demand and supply. If the demand of shares of company x is greater than its
supply then its price of its security increases.

In Online Exchange the trading is done on a computer network. The sellers and buyers log onto
the network and propose, their bids. The system is designed in such ways that at any given
instance, the buyers and sellers are bidding at the best prices.

3
PORTFOLIO MANAGEMENT

Portfolio management in common parlance refers to the selection of securities and their
continuous shifting in the portfolio to optimize returns to suit the objectives of an investor. This
however requires financial expertise in selecting the right mix of Securities in changing market
conditions to get the best out of the stock market. In India, as well as in a number of western
countries, portfolio management service has assumed the role of a specialized service now a days
and a number of professional merchant bankers compete aggressively to provide the best to high
new worth clients, who have little time to manage their investments. The idea is catching on with
the boom on the capital market and an increasing a number of people are included to make
profits out of their hard-earned savings.

Portfolio management service is one of the merchant banking activities recognized by Securities
and Exchange Baard of India (SEBI). The service can be rendered either by merchant bankers or
portfolio managers or discretionary portfolio manager as define in clause (e) and (f) of Rule 2 of
Securities and Exchange Board of India (Portfolio Managers)

Rules, 1993 and their functioning are guided by the SEBI.

According to the definitions as contained in the above clauses, a portfolio manager means
any person who is pursuant to contract or arrangement with a client, advices or directs or
undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise) the

4
management or administration of a portfolio of securities or the funds of the client, as the case
may be. A merchant banker acting as a Portfolio Manager shall also be bound by the rules and
regulations as applicable lo the portfolio manager.

Realizing the importance of portfolio management services, the SEBI has laid down certain
guidelines for the proper and professional conduct of portfolio management services. As per
guidelines only recognized merchant bankers registered with SEBI are authorized to offer these
services.

Portfolio management or investment helps investors in effective and efficient management of

their investment to achieve this goal. The rapid growth of capital markets in India has opened up
new investments avenues for investors. The stock markets have become attractive investment
options for the common man. But the need is to be able to effectively and efficiently manage
investments in order to keep maximum returns with minimum risks.

 Portfolio is a collection of asset.

 The asset may be physical or financial like shares Bonds, Debentures, and Preference
Shares etc.
 The individual invest or a fund manager would not like to put all his money in the shares
of one company, for that would amount to great risk.
 Main objective is to maximize portfolio return and at the same time minimizing the
portfolio risk by diversification.
 Portfolio management is the management of various financial asset, which comprise the
portfolio.
 Designing portfolios to suit Investor requirement often involves making several
projections regarding the future, based on the current information.
 When the actual situation is at variance from the projections portfolio composition needs
to be changed.
 One of the key inputs in portfolio building is the risk bearing ability of the investor.

5
Other types of "investments," including the following:

Application Portfolio Management: This refers to the practice of managing an

entire group or major subset of software applications within a portfolio.

Organizations regard these applications as investment because they require development

costs and incur continuing maintenance costs. Also, organizations must constantly make
financial decisions about new and existing software applications, including whether to
invest in modifying them, whether to buy additional applications, and when to “sell” – that
is, retire-an obsolete software application.

Product Portfolio Management: Businesses group major products that they develop
to sell into portfolios, organized by major line-of-business or business segment. Such
portfolios require ongoing management decisions about what new products to develop and
what existing products to transform or retire.

Project or initiative portfolio management, an initiative, in the simplest sense, is a body of work
with:

 A specific (and limited) collection of needed results or work products.

 A group of people who are responsible for executing the Initiative and use resources,
such as funding.
 A defined beginning and end.

 Managers can group a number of initiatives into a portfolio that supports a business
segment, product, or product line. These efforts are goal-driven; that is, they support
major goals and/or components of the enterprise's business strategy. Managers must
continually choose among competing initiatives selecting those that best support and
enable diverse business goals.

6
BASIC CONCEPTS AND COMPONENTS FOR PORTFOLIO
MANAGEMENT

1. The Portfolio
First we can now introduce a definition of portfolio that relates more directly to
the context of our preceding discussion. In the IBM view, portfolio is: One of the
number of mechanisms, constructed to actualize significant elements in the
Enterprise Business strategy.
It contains a selected, approved , and continuously evolving, collection of Initiatives
which are aligned with the organizing element of the Portfolio and which contribute to
the achievement of goals or goal components identified in The Enterprise Business
Strategy. The basis for constructing a portfolio should reflect the enterprise's particular
needs. For example you might choose to build a portfolio around initiatives for a specific
product, business segment, or separate business unit within a multinational organization.
2. The Portfolio Structure:
As we have noted earlier, a portfolio structure identifies and contains a number of
portfolio .This structure ,like the portfolio w i t h i n it, should align with significant
planning and results boundaries, and with business components. If you have a
product oriented portfolio structure, for example then you would have a
separate portfolio for each project and project group. Each portfolio would
contain all the initiatives that help that particular product or product group
contribute to the success of the enterprise.

3. The Portfolio Manager :

This is a new role for organizations that embrace a portfolio management
approach. A portfolio manager is responsible for continuing oversight of the
contend within in portfolio. If you have several portfolio with your portfolio
structure, then you will likely need a portfolio manager for each one.
The exact range of responsibilities will vary from one organization to another, but
the basics are as follows:
 One portfolio manager oversees one portfolio.

7
 The portfolio manager provides day-to-day oversight.
 The portfolio manager ensures that data is collected and analyzed about each of the
initiatives in the portfolio.
 The portfolio manager enables periodic decision making about the future direction of
Individual initiatives.
4. Portfolio Reviews and Decision making
As initiatives are executed, the organization should conduct periodic reviews of
actual performance end conformance to original expectations. Typically,
organizations managers specify the frequency and contents for these periodic
reviews, and individual portfolio managers oversee their planning and execution. The
reviews should be multi-dimensional, including both tactical elements and strategic
elements.
5. Governance
Implementing portfolio management practices in an organization is a transformation
Effort that typically involves developing new capabilities to address new work efforts,
defining new roles to identify portfolios and delineating boundaries among work efforts
and collections. Implementing portfolio management also requires creating a structure to
provide planning, Continuing direction, and oversight and control for all portfolios and
the initiatives they encompass.
6. Portfolio management essentials
Every practical discipline is based on a collection of fundamental concepts that people
have identified and proven through continuous application.
These concepts are useful until they become obsolete, supplanted by newer and more
effective ideas.

8
FUNCTIONS OF PORTFOLIO MANAGEMENT:

The basic purpose of portfolio management is to maximize yield and minimize risk. Every
investor is risk averse. In order to diversify the risk by investing into various securities following
functions are required to de performed.

The functions undertaken by the portfolio management are as follows:

 To frame the investment strategy and select an investment mix to achieve the desired
investment objective:
 To provide a balanced portfolio which not only can hedge against the inflation but can
also optimize returns with the associated degree of risk;
 To make likely buying and selling of securities.
 To maximize the after-tax return by investing in various taxes saving investment
instruments.

ELEMENTS OF PORTFOLIO MANAGEMENT:

Portfolio management is on-going process involving the following basics tasks:

 Indentification of the investors ojective, constraints and preferences.

 Strategies are to be developed and implemented in tune with investment policy
formulated.
 Review and monitoring of the performance of the portfolio.
 Finally the evaluation of the portfolio.

PROSPECTS OF PORTFOLIO MANAGEMENT:

 At present, there are a very few agencies which render this type of services in an
organized and professional way.
 However, their share in the total volume’s very small.
 There is no constraint on the demand for this type of financial service as every entity
would be saying and investing and interested in optimizing the rate of return.

9
  The size of capital market is increasing.
 There is an increase in the number of stock exchanges.
 New instruments are being introduced in the capital market.
 The equity cult is spreading in the interiors and rural areas.
 The percentage of investment of the household savings is bound to go up.
 It is conservatively estimated that during the eighth plan resource to the turn of over
RS.50000crore will be mobilized through the stock market.
 India today has 20 million investors, as compared to 2 million in 1980.

Steps involved in Portfolio management Process :

 Identification of objectives and constraints.

 Selection of the asset mix.
 Formulation of portfolio strategy
 Security analysis
 Portfolio execution
 Portfolio revision
 Portfolio evaluation.

1. Identification of objectives and constraints

The primary step in the portfolio management process is to identify the limitations and
objectives. The portfolio management should focus on the objectives and constraints of an
investor in first place. The objective of an Investor may be income with minimum amount of
risk, capital appreciation or for future provisions. The relative importance of these objectives
should be clearly defined.

10
2. Selection of the asset mix

The next major step in portfolio management process is identifying different assets that can be
included in portfolio in order to spread risk and minimize loss.

In this step, the relationship between securities has to be clearly specified. Portfolio may contain
the mix of Preference shares, equity shares, bonds etc. The percentage of the mix depends upon
the risk tolerance and investment limit of the investor.

3. Formulation of portfolio strategy

After certain asset mix is chosen, the next step in the portfolio management process is
formulation of an appropriate portfolio strategy. There are two choices for the formulation of
portfolio strategy, namely

 Active portfolio strategy

 Passive portfolio strategy
An active portfolio strategy attempts to earn a superior risk adjusted return by adopting to market
timing, switching from one sector to another sector according to market condition, security
selection or an combination of all of these.

A passive portfolio strategy on the other hand has a pre-determined level of exposure to risk. The
portfolio is broadly diversified and maintained strictly.

4. Security analysis

In this step, an investor actively involves himself in selecting securities.

Security analysis requires the sources of information on the basis of which analysis is made.
Securities for the portfolio are analyzed taking into account of their price, possible return, risks
associated with it etc. As the return on investment is linked to the risk associated with the
security, security analysis helps to understand the nature and extent of risk of a particular
security in the market.

11
Security analysis involves both micro analysis and macro analysis. For example, analyzing one
script is micro analysis. On the other hand, macro analysis is the analysis of market of securities.
Fundamental analysis and technical analysis helps to identify the securities that can be included
in portfolio of an investor.

5. Portfolio execution

When selection of securities for investment is complete the execution of portfolio plan takes the
next stage in a portfolio management process. Portfolio execution is related to buying and selling
of specified securities in given amounts. As portfolio execution has a bearing on investment
results, it is considered one of the important step in portfolio management.

6. Portfolio revision

Portfolio revision is one of the most important step in portfolio management. A portfolio
manager has to constantly monitor and review scripts according to the market condition.
Revision of portfolio includes adding or removing scripts, shifting from one stock to another or
from stocks to bonds and vice versa.

7. Performance evaluation

Evaluating the performance of portfolio is another important step in portfolio management.

Portfolio manager has to assess the performance of portfolio over a selected period of time.
Performance evaluation includes assessing the relative merits and demerits of portfolio, risk and
return criteria, adherence of the portfolio management to publicly stated investment objectives or
some combination of these factors. The quantitative measurement of actual return realized and
the risk borne by the portfolio over the period of investment is called for while evaluating risk
and return criteria. They are compared against the objective norms to assess the relative
performance of the portfolio Performance evaluation gives a useful feedback to improve the
quality of the portfolio management process on a continuing basis.

12
QUALITIES OF PORTFOLIO MANAGER

1. Sound General Knowledge

 Portfolio management is an existing and challenging job
 He has to work in an extremely uncertain and conflicting environment
 In the stock market every new piece of information affects the value of the securities of
different industries in a different way.
 He must be able to judge and predict the effects of the information he
gets.

2. Analytical Ability
 He must have his own theory to arrive at the value of the security
 An analysis of the security’s values. company etc. is continues job of the portfolio
manager.
 The analyst can know the strengths, weakness, opportunities of the economy, industry
and the company.

3. Marketing skills :
 He must be a good sales man.
 He has to convince the clients about the particular security.
 He has to compete with the stock brokers in the stock market.

4. Experience:
 In the cyclical behavior of the stock market history is often repeated, therefore the
experience of the different phases helps to make rational decisions.
 The experience of different types of securities, clients, markets trends etc.

13
FACTORS AFFECTING THE INVESTOR

There may be many reasons why the portfolio of en investor may have to be changed. The
portfolio manager always remains alert and sensitive to the changes in the requirements
of the investor. The following are the some factors affecting the investor, which make it
necessary to change the portfolio composition.

1. Change in wealth
 According to the utility theory, the ability of the investor increase with increase in wealth.
 It says that people can afford to take more risk as they grow rich and benefit from its
reward.
 But, in practice, while they can afford, they may not be willing.
 As people get rich, they become more concerned about making losing the newly got
riches than getting richer.
2. Change in the time horizon
 Births, deaths, marriages, and divorces — all have their own impact on the investment
horizon.
 There are of course, many other important events in the person’s life that may force a
change in the investment horizon.
3. Change in Liquidity Needs
 Investors very often ask the portfolio manager to keep enough scope in the portfolio to
get some cash as and they want.
 This forces portfolio manager to increase the weight of liquid investments in the asset
mix.
 Due to this, the amounts available for investment in the fixed income or growth securities
that actually help in achieving the goal of the investor get reduced.
4. Change in Taxes
 It is said that there are only two things certain in this world – deaths and taxes.
 The only uncertainties regarding them relate to the date, time, place and mode.
 Portfolio manager have to constantly look out for changes in the tax structure and make
suitable changes in the portfolio composition.
 The rate of tax under long – term capital gains is usually lower than the rate applicable
14
 for income. If there is a change in the minimum holding period for a long – term capital
gains, it may lead to revision. The specifics of the planning depend on the nature of the
investments.

5. Others
 There can be many of other reasons for which clients may ask for a change in the
asset mix in the portfolio.
 For example, there may be change in the return available on the investments that have to
be compulsorily made with government say, in the form of provident fund.

RISK-RETURN ANALYSIS

RISK ON PORTFOLIO:

The expected returns from individual securities carry some degree of risk. Risk on the portfolio is
different from the risk on individual securities. The risk is reflected in the variability of the
returns from zero to infinity. Risk of the individual assets or a portfolio is measured by the variance
of its return. The expected return depends on the probability of the returns and their weighted
contribution to the risk of the portfolio. These are two measures of risk in this context one is the
absolute deviation and other standard deviation.

Most investors invest in a portfolio of assets because as to spread risk by not putting all eggs in one
basket. Hence, what really matters to them is not the risk and return of stocks in isolation, but the
risk and return of the portfolio as a whole. Risk is mainly reduced by Diversification.

Following are the some of the types of Risk:

1) Interest rate risk :

This arises due to the variability in the interest rates from time to time. A change in
the interest rate establishes an inverse relationship in the price of the security i.e. price
of the security tends to move inversely with change in rate of interest, long term
securities show greater variability in the price with respect to interest rate changes
than short term securities.

15
 Interest rate risk vulnerability for different securities is as under:

TYPES RISK EXTENT

Cash equivalent Less vulnerable to interest rate risk
Long term bonds More vulnerable to interest rate risk.

2.)Purchasing power risk :

It is also known as inflation risk also emanates from the very face that inflation affects the
purchasing power adversely.

Nominal return contains both the real return component and an inflation premium in a
transaction involving risk of the above type of compensate for inflation over an investment
holding period. Inflation rates vary over lime and investors are caught unaware when rate of
inflation changes unexpectedly causing erosion in the value of realized rate of return and expected
return

Purchasing power risk is more in inflationary conditions especially in respect of bonds and fixed
income securities. It is not desirable to invest in such securities during inflationary periods.
Purchasing power risk is however, less in flexible income securities like equity shares or common
stock where rise in dividend income off-sets increase in the rate of inflation and provides
advantage of capital gains.

2) Business risk:
Business risk emanates from sale and purchase of securities affected by business
cycles, technological changes etc. Business cycles affect all types of securities i.e.
there is cheerful movement in boom due to bullish trend in stock prices whereas
beamish trend in depression brings down fall in the prices of all types of securities
during depression due to decline in their market price.
3) Financial risk:
It arises due to changes in the capital structure of the company. It is also known as
leveraged risk an expressed in terms of debt-equity ratio.
4) Systematic Risk or Market Related Risk :

16
 Systematic risks affected from the entire market are (the problems. raw material
availability, tax policy or government policy, inflation risk, interest risk and financial
risk). It is managed by the use of Beta of different company shares.
5) Unsystematic risks :
The unsystematic risks are mismanagement, increasing inventory, wrong financial policy,
defective marketing etc. This is diversifiable or avoidable because it is possible to
eliminate or diversify away this component of risk to a considerable extent by investing in a
large portfolio of securities. The unsystematic risk stems from inefficiency magnitude of
those factors different form one company to another.

RISK RETURN ANALYSIS:

All investments have some risk. Investment in shares of companies has its own risk or
uncertainty; these risks arise out of variability of yields and uncertainly of appreciation or
depreciation of share prices, losses of liquidity etc.

The risk over time can be represented by the variance of the returns while the return over time is
capital appreciation plus payout, divided by the purchase price of the share.

Normally, the higher the risk that the investor takes, the higher is the return. There is, however, a
risk less return on capital of about 12o/ which is the bank, rate charged by the R.B.I or long term,
yielded on government securities at around 13% to 14%. This risk less return refers to lack of
variability of return and no uncertainty in the repayment or capital. But other risks such as loss of
liquidity due lo parting with money, may however remain, but are rewarded by the total return on
the capital.

RETURNS ON PORTFOLIO:

Each security in a portfolio contributes return in the proportion of its investments in security. Thus
the portfolio expected return is the weighted average of the expected return , from each of the
securities, will weights representing the proportions share of the security in the total investment.

17
Why does an investor have so many securities in his portfolio ? If the security ABC gives the
maximum return why not he invests in that security all his funds and thus maximize return?

The answer to these questions lie in the investor’s perception of risk attached to investments, his
objective of income, safety, appreciation. Liquidity and hedge against loss of value of money etc.
This pattern of investment in different asset categories, types of investment, etc., would all be
described under the caption of diversification, which aims at the reduction or even elimination of
non-systematic risks and achieve the specific objectives of investors.

ASSEST ALLOCATION

INTRODUCTION

The portfolio manager has to invest in these securities that form the optimal portfolio. Once a
portfolio is selected the next step is the selection of the specific assets to be included in lie
portfolio. Assets in this respect means group of security or type of investment. While selecting
the assets the portfolio manager has to make asset allocation, |t is the process of dividing the
funds among different asset class portfolios.

ASSET ALLOCATION

The different asset class definitions are widely debated, but four common divisions are stocks,
bonds, real-estate and commodities. The exercise of allocating funds among these assets is
what investment management firms are paid for.

18
Asset classes exhibit different market dynamics, and different interaction effects; thus, the
allocation of monies among asset classes will have a significant effect on the performance of the
fund. Some research suggests that allocation among asset classes has more predictive power than
the choice of individual holdings in determining portfolio return. Arguably, the skill of a
successful investment manager resides in constructing the asset allocation, and separately the
individual holdings, so as to outperform certain benchmarks.

DIVERSIFICATION

Investing funds in a single security is advisable only if the security's performance is rewarding .
To reduce risk of a portfolio investors resort to diversification. Diversification means shifting
from one security to another security. The maximum benefits of risk reduction can be achieved
by just having of 10 to 15 carefully selected securities.

Portfolio risk can be divided into two groups- diversible risk and non- diversible risk. Diversible
risk arises from company’s specific factors. Hence such risk can be diversified by including
stocks of other companies in the portfolio.

Non-diversible risk arises from the influence of economy wide factors which affect returns of all
companies; investors cannot avoid the risk arising from them. Often investors tend to buy or sell
securities on casual tips: Prevailing mood in the market, sudden impulse, or to follow others. An
investor should investigate the following factors about the stock to be included in his portfolio:

 Earning per share

 Growth potential
 Dividend and bonus record
 Business, financial and market risks
 Behavior of price-earning ratio

19
  High and low prices of the stock

 Trend of share prices over the few months or weeks

We can observe from the above diagram that the strategy of an investor should be at A,B or C
respectively, depending upon his preferences and his income requirements. If he makes some
risk at B or C the risk can be reduced if it is concerned with a specific company risk, but the
market risk is outside his control. The risk can be reduced by a proper diversification of scripts in
the portfolio. There may be a combination of A, B and C positions in his portfolio so that he can have
a diversified risk-return pattern. This diversification can help to minimize risk and maximum the
returns.

20
 NEED FOR SELECTING THE PROJECT

• To get the overall knowledge of securities and Investment.

• To know how the investment made in different securities
minimizes the risk and maximizes the returns.
• To get the knowledge of different factors that affects the
investment decision of investors.
• To know how different companies are mana9in9 their
portfolio i.e. when and in which sectors they are investing.
• To know what is the need of appointing a Portfolio Manager
end how does he meets the needs of the various investors.
• To get the knowledge about the role (played) and functions of portfolio
manager.
• To get the knowledge of investment decision and asset allocation.

21
OBJECTIVES OF PORTFOLIO MANAGEMENT:

Capital appreciation: The primary objective of portfolio management is to enjoy capital

appreciation. The principal invested should grow into a corpus at a higher rate than inflation. It
should also minimize risks such as market swings and fund erosion via taxes. If the investor
agrees, reinvesting can be considered to generate more income.

Frequency of income generation: While some investors seek regular income that can be
enjoyed through dividends, others may prefer receiving a larger maturity corpus in the form of
capital appreciation. A portfolio manager should consider these factors when building one.

Stable return rate: While capital appreciation is the goal, an investment portfolio should
provide you with a steady flow of returns while ensuring the safety of the investment. At the
least, your current return income should meet the opportunity cost of your funds.

Tax planning: Earning handsome returns but not being able to retain them due to poor tax
planning is disappointing. Different assets are taxed differently. Hence, a portfolio manager
should consider tax policies during asset allocation to help investors plan their taxes better and
not evade them.

Diversification: There’s nothing called zero risk. That is to say, no risk, no returns. Hence,
the only way to enjoy maximum returns is by minimizing risk, which can be done through
diversification.

Long-term planning: Planning your sunset years in advance can help you carve out a clear
path to achieve your retirement goals. Hence, it is considered that the earlier you start, the better.
A portfolio manager should consider your retirement and long-term goals while crafting your
portfolio.

22
SCOPE OF THE STUDY

This study covers the Markowitz model. The study covers the calculation of correlations
between the different securities in order to find out at what % funds should be invested among
the companies in the portfolio. Also the study includes the calculation of individual Standard
Deviation of Securities and ends at the calculation of weights of individual securities involved in
the portfolio. These percentages help in allocating the funds available for investment based on
risky portfolios.

Limitations Of The Study

 sample size is limited by 5 stocks from 5 different sectors.

 Markowitz modern portfolio theory is used here to calculate return & risk of portfolio
 Portfolio created for the study is of 2 securities/stock combination, for making study
easier and understandable. Portfolios with 2 or more number of stock can give a wider
image of portfolio management.
 While constructing portfolios the stock arc given equal weightage, return & risk will
change if weightage is different .
 The data was collected from the time horizon of one financial year starting from April
2014 to March 2015
 The data has been collected from secondary sources only, relevance of information may
not fully trustworthy.

23
Research Methodology
Aim

The main aim of this study is to understand the portfolio management also to understand the
effect while investing in single security and investing in more than one security i.e.
diversification.

Objectives

► To calculate the return of various companies

► To calculate the risk of various companies.

► To calculate the portfolio return & risk of different portfolios designed for the combination
of various companies.

► To evaluate the performance of various portfolios.

► To understand , analyze and select the best, portfolios.

► To understand the effect of diversification of investment.

Research Methodology

 Research type: - Empirical

 Type of sampling: - Convenient sampling
 Sample size: - 5 companies from different sectors is selected from NSE CNX Nifty
 Sample universe: - Companies listed & trade in NSE
 Data type:-Secondary data
 Research tools used:-
a. Arithmetic average or mean
b. Return= Dividend + (Current price- Pervious price}*I00/ Previous price
c. Standard deviation
d. Variance

24
 e. Correlation- Karl Pearson's method
f. Sharpe's Index
g. Treynor's Index
h. Jenson's Index

Data Collection Methods

The entire data were collected from the secondary source. Internet is main source of secondary
sources of date collection used. Magazines, Newspapers and Journals were also used for
collecting data .

Analysis And Interpretations

The analysis and interpretation has been mode with the help of graphs and percentages of
returns of securities. Microsoft Excel2010 is the software used for this purpose.

25
 CHAPTER-2

LITERATURE REVIEW

Jamadar Lal : (1992) presents a profile of Indian investors and evaluates their investment
decisions. He made an effort to study their familiarity with, and comprehension of financial
information, and the extent to which this is put to use. The information that the companies.
provide generally fails to meet the needs of a variety of individual investors and there is a
general impression that the company's Annual Report and other statements ore not well received
by them.

Jack Clark Francis : (1986) revealed the importance of the rate of return in investment and
reviewed the possibility of default bankrupt risk. He opined that in an uncertain world, investors
cannot predict exactly what rate of return an investment will yield. However he suggested that
the investors can formulate a probability distribution of the possible rate of return.

Now academic portfolio theory is an extension of traditional portfolio advice first posited by
Markowi1z :(Journal of finance, 1952). The traditional advice suggests a "two-fund theorem''
that allocates between risk-free bonds and a broad-based passively managed stock fond. The
most efficient portfolios, those on the mean- variance frontier, can be formed by combining those
two asset classes. Tailoring portfolios by adding style-based asset classes is inefficient because
each of these classes lies on or inside the frontier. Therefore, every investor needs to hold only
1he two basic asset classes, with risk aversion determining the proportions.

John H. Cochrane : Investors today face numerous and often bewildering investment decisions.
Investors used to have fairly straight forward choices to make, selecting among managed mutual
funds, index funds and expensive trading in a personal account. Today, a wide variety of styles
exist among funds, active managers offer customized and complex strategies, and inexpensive
online trading is widely available. The author reviews these issues and addresses how they affect
asset allocation decisions, particularly in multifactor models. He also examines return
predictability and describes how the stock market acts as large insurance market by facilitating
the transfer of risk among investors.

26
Lubos pastor: The author develops a portfolio – selection method using a Bayesian framework
that incorporates a prior degree of belief in an asset-pricing model. In the empirical analysis, the
author evaluates sample evidence on home bias, value, and size effect from an asset allocation
perspective. The results provide a different perspective from that normally found in the literature
on the benefits of international diversification.

GUSTAVO GRULLON AND ROMICHA: Cash dividends and stock repurchases are two
major forms of payouts to stockholders. They influence stock prices and returns and thus
decisions for investing and trading in stocks. The authors analyze the behaviorof U.S.
corporations that paid dividends and repurchased shares in the 1972-2000 period. They address
the relative merits or dividends and repurchases from the corporation's point of view, the
substitutability between the two forms of payout, and the differences in their tax treatment from
the investor's perspective. Their findings are of interest to corporate financial officers, equity
analysts, and portfolio managers.

Osrhoff, Peer C. and Kempf, Alexander: More and more investors apply socially responsible
screens when building their stock portfolios. This raises the question whether these investors can
increase their performance by incorporating such screens into their investment process. To
answer this question we implement a simple trading strategy based on socially responsible
ratings from the KLD Research & Analytics: Buy stocks with high socially responsible ratings
and sell stocks with low socially responsible ratings. We find that this strategy leads to high
abnormal returns of up to 8.7% per year. The maximum abnormal returns are reached when
investors employ the best-in-class screening approach, use a combination of several socially
responsible screens at the same time, and restrict themselves to stocks with extreme socially
responsible ratings.

27
 CHAPTER-3

Company Profile

Sharekhan is one of the leading retail broking House of SSKI Group which was running
successfully since l922 in the country. It is the retail broking arm of the Mumbai-based SSKI
Group, which has over eight decades of experience in the stock broking business. Sharckhan
offers its customers a wide range of equity related services including trade execution on BSE,
NSE, Derivatives, depository services, online trading, investment advisory. Mutual Fund
Advisory etc.

The firm’s online trading and investment site - www.sharekhan.com – was launched on Feb 8,
2000. The site gives access to superior content and transaction facility to retail customers across
the country. Known for its jargon-free, investor friendly language and high quality research, the
site has o registered base of over two lakh customers. The number of trading members currcntly
stands more than 8 Lacs. While online trading currently accounts for just over 8 percent of the
daily trading in stocks in India, Sharckhan alone accounts for 32percent of the volumes traded
online.

The content-rich and research oriented portal has stood out among its contemporaries because
of its steadfast dedication to offering customers best-of-breed technology and superior market
information. The objective has been to let customers make informed decisions and to simplify
the process of investing in stocks.

On April 17, 2002 Sharckhan launched Speed Trade, a net-based executable application that
emulates the broker terminals along with host of other information relevant to the Day Traders.
This was for the first time that a net-based trading station of this caliber was offered to the
traders. In last six months Speed Trade has become a de facto standard for the Day trading
community over the net.

On October 01 , 2007 Sharckhan again launched his another integrated Software based product
Trade Tiger , a net based executable application that emulates the broker terminals along with
host of other information relevant to the day traders. It has another quality which differs it from
other that it has the combined terminal for equity and commodities both.

28
Sharekhan’s ground network includes over 1005 centers in 410 cities in india, of which 210 are
fully owned branches. Sharekhan has always believed in investing technology to build its
business. The company has used some of the best-known names in the IT industry, like Sun
Microsystems, Oracle. Microsoft, Cambridge Technologies, Verisign Financial technologies
India Ltd, Spider Software Pvt Ltd. to build its trading engine and content. Previously the
Morakiya family holds majority stake in the company but now a world famous brand CITI
GROUP has taken a majority stake in the company. HSBC, Intel & Carlyle arc the other
investors.

With a legacy of more than 80 years in the stock market . the SSKI group ventured into
institutional broking and corporate finance 18 years ago. Presently SSKI is one of the leading
players in institutional broking and corporate finance activities. SSKI holds a sizeable portion of
the market in each of these segments. SSKl's institutional broking arm accounts for 7% of the
market for Foreign Institutional portfolio investment and 5% of all Domestic Institutional
portfolio investment in the country. It has 60 institutional clients spread over india, Far East,.
UK and US, Foreign Institutional Investors generate about 65% of the organization's revenue,
with a daily turnover of over USS 4 million. The Corporate finance scction has a list of very
prestigious clients and has many ‘firsts’ to its credit, in terms of the size of deal, sector tapped
etc. The group has placed over US$ 1 billion in private equity deals. Some of the clients include
BPL Cellular Holding, and Shopper's Stop.

Sharekhan Business

Brokering business.

Vision

To be the best retail broking brand in the retail business of the stock market.

Mission

To educate and empower the individual investor to make better investment decisions through
quality advices and superior services.

29
Sharekhan is the retail broking arm of SSKI , an organization with more than eight decade of
trust and credibility in the stock market.

Amongst pioneers of investment research in the indian market.

In 1984 venture into institutional broking and the corporate finance.

Over US$ 5 billion or private equity deal.

SSKI group companies

SSKI investor services ltd (Sharekhan)

S.S. Kantilala lsharlal securities

SSKI corporate finance.

Privacy Policies
Sharekhan as a SEBI registered intermediary is mandated to follow the rules, regulations,
circulars of the exchanges and SEBI issued from time and operates through well defined
procedures and policies. The following policies have been mandated by SEBI to be made
available to the clients.

1. Refusal of orders for Penny Stocks

Penny stocks are scrips which have a very low value and may or may not be illiquid. Most times
there would be very few buyers /sellers for such scrips. The exchange (NSE & BSE) releases a
list of such scrips and they are termed as illiquid securities. Sharekhan retains the right to term a
particular scrip as illiquid/penny stock based on the parameters it deems fit. These parameters
may include, the past volume of the scrip, the volatility in the scrip among others, whether
trading in a particular scrip falls within the purview of fraudulent trades or trades deemed to be
fraudulent under the SEBI - prohibition of fraudulent and unfair trade practices relating to
securities market regulation 2003.

30
 2. Setting up Client's exposure Limits

Exposure is allowed to the clients based on the margin available in form of funds or approved
securities valued after deducting an appropriate haircut. Client is liable to pay applicable initial
margins, withholding margins, special margins, delivery margin or such other margins as are
considered necessary by the Exchange. Margin would be applicable on Buy and Sell trades.

3. Applicable Brokerage

The brokerage applicable shall be as agreed upon from time to time. In case of any modification
in the brokerage rate, the client shall confirm the same as required by Sharekhan. The client
agrees to pay to Sharekhan, brokerage, Exchange related charges, statutory levies and any other
charges (including but not limited to security handling charges on settlement) as are prevailing
from time to time and as they apply to the client's account, transactions and with respect to the
services opted by the client and thereby rendered by Sharekhan.

4. Imposition of Penalty / Delayed payment charges by either party, specifying the rate and
period.

Delay pay-in charges are levied to clients for delay in payment of their fund obligation on time
which may be due on account of charges,margins or any other sum due to Sharekhan.

5. Right to sell client’s securities or close client’s positions, without giving notice to the
client on account of non payment of client’s dues:–

The client agrees to pay for the shares purchased through Sharekhan before the pay-in date in
order to enable Sharekhan to make there quisite pay-in to the exchange. In case the client fails to
make the payment, Sharekhan may liquidate the securities in the clients accountwithin five
trading days after payout or as per Risk Management of Sharekhan This square off may be done
on or before the 5th day from these ttlement date. Sharekhan may at its discretion also not
liquidate the securities and may transfer such securities to its Client Demat account.

31
Products And Services

Classic Account

This account allows the client to trade through the website www.sharekhan.com and is suitable
for the retail investor who is risk averse and hence prefers to invest in stocks or who do not trade
frequently.

It allows investor to buy and sell stocks online along with the following features like multiple
watch lists, integrated Banking , De-mat and digital contracts, Real-time portfolio tracking with
alerts and instant money transfer.

Features

 Online trading account for investing in Equity and Derivatives via www.sharekhan.com
 live Terminal and Single terminal for NSE Cash, NSE F&O, BSE & Mutual Funds (Online
and offline)
 Integration of Online trading, Saving Bank and De-mat Accounts.
 Instant cash transfer facility against purchase & sale of shares.
 Instant order and trade confirmation by E-mail.
 Streaming Quotes (Cash & Derivatives).
 Personli1zed market watch.
 Single screen interface for Cash and derivatives and more.
 Provision to enter price trigger and view the same online in market watch.

TRADE TIGER

TRADE TIGER is an internet-based software application which is the combination of EQUITY

& COMMODITIES, that enables you to buy and sell share and well as commodities item
instantly. It is ideal for every client of SHAREKHAN LTD.

FEATURES

Integration of EQUITY & COMMODITIES MARKET.

32
• Instant order Execution and Confirmation.

• Single screen trading terminal for NSE Cash, NSE F&O & BSE & Commodities.

• Technical Studies.

• Multiple Charting.

• Real-time streaming quotes, tic-by-tic charts.

• Market summary (Cost traded scrip. highest value etc.)

• Hot keys similar to broker's terminal.

• Alerts and reminders.

DAIL-N-TRADE

Along with enabling access for your trade online, the CLASSIC and TRADE TIGER
ACCOUNT also gives you our Dial-n-trade services. With this service, all you have to do is dial
our dedicated phone lines which are 1800,22-7500.3970•7500.

PORTFOLIO MANAGEMENT SERVICES

Sharekhan is also having Portfolio Management Services for Exclusive clients.

1. Proprime - Research & Fundamental Analysis

Ideal for investors looking at steady and superior returns with low to medium risk appetite.
This portfolio consists of blend of quality blue chip and growth stocks ensuring a balanced
portfolio with relatively medium risk profile. The portfolio will mostly have large capitalization
stocks based on sectors & themes that have medium to long term growth potential.

2. Protech - Technical Analysis

Protech uses the knowledge of technical analysis and the power of derivatives market to
identify trading opportunities in the market. The protech lines of products are designed around
various risk/reward/ volatility profiles for different kinds of investment needs.

33
• Thrifty Nifty:

Nifty futures are bought and sold on the basis of an automated trading system that generates
calls to go long/short. The exposure never exceeds value of portfolio i.e. there is no leveraging:
but being short in nifty allows you to cam even in falling markets and there by generate linear.

Beta Portfolio:

Positional trading opportunities are identified in the futures segment based on technical
analysis. Inflection points in the momentum cycles arc identified to go long/short on stock/index
futures with 1-2 month time horizon. The idea is to generate the best possible returns in the
medium term irrespective of the direction of the market without really leveraging beyond the
portfolio value. Risk protection is done based on stop losses on daily closing prices.

• Star Nifty:

Trailing Stops Momentum trading techniques are used to spot short term momentum of 5-10
days in stocks and stocks/index futures. Trailing stop loss method of risk momentum or profit
protection is used to lower the portfolio volatility und maximize returns. Trading opportunities
are explored both on the long and the short side as the market demand to get the best of both
upwards & downward trends.

Corporate Structure

34
 CHAPTER-4

ANALYSIS AND INTERPRETATION

RETURN AND RISK OF BENCHMARK INDEX : NSE CNX NIFTY

R= Dividend = (P1-P0)/P0*100

Return for NSE CNX Nifty = 1.92%

35
Risk , S.D CALCULATON OF NSE,CNX NIFTY

36
Return And Risk Of Individual Stocks

1. HDFC BANK LIMITED

HDFC bank Limited is an Indian banking and financial services company headquartered in
Mumbai. Incorporated in 1994, is the fifth largest bank in India as measured by assets. It is the
largest private sector bank in India by market capitalization as of February 2014. The bank was
promoted by the Housing Development Finance Corporation , a premier housing finance
company (set up in 1977) of India. According to the Brand Trust Report 2014, HDFC was
ranked 32nd among India's most trusted brands. HDFC was ranked 45th on the list of top 50
Banks in the world in terms of their market capitalization.

37
The HDFC Bank Limited had given a good return of 2.90% per month with a high risk rate of
5.22 during the financial year 2015. The return includes a dividend of 6.85 per share.

38
2.Lupin Limited

Lupin Limited is a transnational pharmaceutical company based in Mumbai. It is the seventh-

largest company by market capitalization: and the 10th largest generic pharmataceutical
company by revenue globally. Lupin is the fifth-largest generic phannaceutical company in the
US by prescription –led market share and 3rd largest Indian pharma company by revenue. It has
the distinction of being the fastest growing generic phannuccutical player in the two largest
pharmaceutical markets of the world - the US and Japan: and is the 4th largest and the fastest
growing generic pham1accutical player in South Africa

Return, R (Avg) Calculation

39
The Lupin Limited had given an excellent return of7.13% with comparatively low risk of 7.17
during FY 15. The return includes a diviend of 3 per share.

40
3. HINDUSTAN UNILEVER

Hindustan Unilever Limited (HUL) is on Indian consumer goods company bused in Mumbai
Maharashtra. It is owned by Anglo-Dutch Company Unilever which owns a 51.51% controlling
share in HUL as of March 2015 and is the holding company of HUL. HUL's products include
foods, beverages, cleaning agents, personal care products nod water purifiers.

Return,R (Avg) Calculation of HUL

41
The HUL has given • return of 4.37% with a high risk of 8.49 during FY15 (MoM), Which includes a
dividend of 13.50 per share.

42
Tata Consultancy Services Limited (TCS) is an Indian multinational information technology {IT)
service, consulting and business solutions company headquartered in Mumbai. TCS operates in
46 countries. It is a subsidiary of the Tata Group and is listed on the Bombay Stock Exchange
and the National Stock Exchange or India. TCS is one of the largest Indian companies by market
capitalization (S80 billion) and is the largest India-bused IT services company by 2013
revenues. TCS is now placed among the ‘Big 4' most valuable IT services brands worldwide. In
2013, TCS is ranked 57th overall in the Forbes World's Most Innovative Companies ranking,
making it both the highest-ranked IT services company and the first Indian company. It is the
world's 10th largest IT services provider, measured by the revenues.

Return, R (Avg) calculation

43
Tata Motors Limited is an Indian multinational automotive manufacturing company headquartered in
Mumbai, India and a subsidiary of the Tata Group. Its products include passenger cars, trucks, vans,
coaches, buses, construction equipment and military vehicles. It is the world’s 17th – largest motors
vehicle manufacturing company.

44
45
Beta of stocks
Beta of stocks with respect to NSE, CNX Nifty

Where,

rp = Return of individual stock

rb = Return of NSE CNX Nifty

When,

β>1= Aggressive

β =1= Moderate

β <1= Conservative

HDFC Bank, HUL and Tata Motors are beating the market return with beta of 1.13,1.73,and
1.42 respectively. So , they are very aggressive.

While Lupin and TCS has got low beta of 0.41 and 0.07 respectively . so they are conservative.

46
 Return, Risk and Beta of stocks
Return, Risk and beta of Individual Stock

The Lupin and TCS is the top performer in terms of return. But while comparing
the risk adjusted return Lupin is the out performer compared to rest 4 stocks .

47
correlation between stocks/securities should be negative. So that if one stock moves other moves
down therefore the loss and profi1will be limited in the portfolio and risk also will be low.

If the correlation between stocks/securities is positive. there is a chance of unlimited loss and
unlimited up profit, in the portfolio. The risk of portfolio will be comparatively high.

Combination of HDFC Bank & Lupin , HDFC Bank & TCS and TCS &Tata motors has got
negative correlation, which is better.

48
Return And Risk of various portfolios
Calculation of Portfolio Return:

Rp = (RA*WA) + (RB*WB)
Where Rp = portfolio return

RA= return of A WA=Weight of A

RB = Return of B WB= Weight of B

Calculation of portfolio Risk:

Portfolio Risk = SQRT

Where,

Wx,Wy= Proportion of total portfolio invested in securities X and Y .

Sdx , sdy = Standard deviation of stock X and Y.

rxy=Correlation coefficient of X and Y.

Portfolio 1

Portfolio Return, Rp= (2.90*0.50)+(7.13*0.50)=5.015%

Portfolio Risk = 3.

49
Portfolio 2

Portfolio Return ,Rp= (2.90*0.50)+(4.37*0.50)=3.64%

Portfolio Risk =6.52

Portfolio 3

Portfolio Return,Rp = (2.90*0.50)+(6.98*0.50)=4.94%

Portfolio Risk = 8.38

50
Portfolio 4

Portfolio Return,Rp=(2.90*0.50)+(2.79*0.50)=2.84.5

Portfolio Risk= 5.93

Portfolio 5

Portfolio Return, Rp=( 7.13*0.50)+(4.37*0.50)=5.57

Portfolio Risk= 6.14

51
Portfolio 6

Portfolio Return, Rp=(7.13*0.50)+(6.98*0.50)=7.055%

Portfolio Risk = to.84

Portfolio 7

Portfolio Return, Rp=(7.13*0.50)+(2.79*0.50)=4.96%

Portfolio Risk= 5.98

52
Portfolio 8

Portfolio Return, Rp=(7.13*0.50)+(6.98*0.50)=5.675%

Portfolio Risk =to.41

Portfolio 9

Portfolio Return, Rp=(4.37*0.50)+(2.79*0.50)=3.58%

Portfolio Risk= 7.71

53
Portfolio 10

Portfolio Return, Rp=(6.98*0.50)+(2.79*0.50)=4.885%

Portfolio Risk=9.11

54
 Beta of Portfolios
Beta of portfolio with respect to NSE CNX Nifty

ßp=( 'ßx*Wx)+( ßy*Wy)

Where,

ßp= beta of portfolio

ßx & ßy=Beta of stock 1 and 2.
Wx& Wy =Weightage of stock 1 and 2.

When,

βp >1= Aggressive

βp=1= Moderate

βp>1= Conservative

55
 RETURN,RISK AND BETA OF PORTFOLIO

Taking risk adjusted return: HDFC Bank and Lupin, Lupin and HUL,Lupin and
Tata Motors are the combinations which are out – performers.

56
 PORTFOLIO PERFORMANCES EVALUATION
Sharpe’s Index

Sp=(Rp-T)/SD

Where,

Rp= Return of Portfolio

T= Risk free return

SD= Standard Deviation

Here, T=8.5% per annum (0.71%per month)

A Portfolio with highest sharepe’s index , Sp is best compared to other portfolios.

Which can be ranked according to that.

57
As per Sharpe’s Index : HDFC Bank and Lupin , Lupin and HUL, Lupin and Tata
Motors, Lupin and TCS and HDFC Bank and TCS are the top 5 ranks .

Which are also top performers in giving return compared to other combinations.

58
Treynor’s Index

Tp=(Rp-T)/ßp

Where

Rp= Return of Portfolio

T= Risk free return

ß =Beta of portfolio
Here, T=8.5%per annum (0.71%per month)

A portfolio with highest Treynor’s Index,Tp is best compared to other portfolios.

Which can be ranked according to that.

59
As per Treynor’s Index: HDFC Bank and Lupin, HDFC Bank and TCS, Lupin and
Tata Motors , Lupin and HUL and TCS and Tata Motors are the top 5 ranks.

60
Jenson’s Index- Reward to risk ratio

Jenson’s Index, ERP= T+ ßp *(ERM-T)

Where,

ERM= return of market portfolio

ERM=1.92%

T= Risk free return

ßp = Beta of portfolio

Portfolio with Rp>Erp= Efficient

Portfolio with Rp<Erp= Ineffcient

61
According to Jenson’s Index: All the portfolio are efficient, which means each
portfolio has given excellent return than the expected return from them.

62
 CHAPTER-5

FINDINGS
As the study on portfolio management makes me to understand and learn many things.
The findings of the study are :
 Among the individual stock calculation, Lupin is better stock with return of 7.13% and
risk of 7.17 and beta of -0.41. In terms of return TCS is also better with a return of
6.98%., but the risk is 16.80. which is 100 high and with a beta of 0.07 So, TCS is not
good option for investors to invest.
 HUL is also good in terms of return, Which is 4.37% with risk of 8.49, but the beta is
1.73. Therefore HUL is highly sensitive.
 On portfolio construction on equal combination of HDFC bank & Lupin has given a
better risk adjusted return of 5.02% with risk of only 3.71. The beta of HDFC Bank &
Lupin is 0.50. The correlation and Covariance between HDFC Bank & Lupin are -0.32
and 1 1.81 respectively.
 Lupin & HUL and Lupin & Tata Motors are also good enough in risk adjusted return.
The return, and risk of Lupin & HUL are 5.75% and 6.14 . The beta of Lupin & HUL is
0.80 with correlation and covariance of 0.23 and 13.68 respectively. And the return and
risk of Lupin & Tata Motors arc 4.96% and 5.98 respectively. The beta of Lupin & Tata
Motors is 0.64 with correlation and covariance of0.20 and 11.89.
 A combination or lupin & TCS is the high return combination with a return of 7.06%,
but the risk is 10.84 and the beta is-0.04.
 On evaluating portfolio performance , HDFC Bank and Lupin ranks 1st in both Sharpe’s
and Treynor’s index , and also this combination of Lupin and TCS performed well in
beating estimation. The expected return from Lupin and TCS IS 0.067%, but the actual
return is 7.06%
 Finally the noticing thing is that , a portfolio with Lupin is well performed.

63
CONCLUSION

On behave of the portfolio management study we can conclude that:

 The aim and objectives of the study has achieved.

 Investors with low risk averse can go for investing in a combination HDFC Bonk & Lupin , as the
risk is very low.
 Investors with moderate risk can go for investing in a combination of Lupin & HUL and Lupin &
Tata Motors, us the risk is not so high.
 Investors, who are aggressive can for investing in a combination of Lupin & TCS, HUL & TCS. TCS
& Tata Motors., HDFC Bank & TCS, HDFC Bank & Tata Motors, HDFC Bank & HUI, and TCS & Tata
Motors.
 Don’t put your trust in only one investment . It is like” putting all the eggs in one basket “ This
will help to reduce the risk in the long term.
 The investors are benefited by investing in the Investor selected scripts of Industries.

“Grater portfolio return with less risk is always is an attractive combination” for invrstors.

64
 CHAPTER-6

BIBLIOGRAPHY

REFERENCE BOOKS:

Security Analysis and Portfolio Management – Dhanesh Khatri

Financial Management – Prasanna Chandra
Financial Management – I M Pandey
Investment Analysis and Portfolio Management

SOURCES:

www.google.com
www.yahoo.com
www.wikipedia.com
www.bscindia.com
www.globalrcsearch.co.in
www.valucrcsearchonlinc.com
www.busincss1imes.com
www.economicstimcs.com
www.forbes.com
www.stocktradcrschat.com
www.cconomictirnes.indiatimes.c-0m/defini1ion/
www.rediff.com/business

65
 CHAPTER-7

ANNEXURE:

The Top Portfolio Managing Companies of the World:

66
67